The Market Lifts Xinjiang International Industry Co.,Ltd (SZSE:000159) Shares 29% But It Can Do More

Xinjiang International Industry Co.,Ltd (SZSE:000159) shareholders have had their patience rewarded with a 29% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 17% is also fairly reasonable.

Although its price has surged higher, it's still not a stretch to say that Xinjiang International IndustryLtd's price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Oil and Gas industry in China, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Xinjiang International IndustryLtd

What Does Xinjiang International IndustryLtd's Recent Performance Look Like?

For instance, Xinjiang International IndustryLtd's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Xinjiang International IndustryLtd will help you shine a light on its historical performance.

How Is Xinjiang International IndustryLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Xinjiang International IndustryLtd would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 49% decrease to the company's top line. Still, the latest three year period has seen an excellent 211% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

When compared to the industry's one-year growth forecast of 7.4%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Xinjiang International IndustryLtd is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Its shares have lifted substantially and now Xinjiang International IndustryLtd's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We didn't quite envision Xinjiang International IndustryLtd's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Xinjiang International IndustryLtd you should know about.

If you're unsure about the strength of Xinjiang International IndustryLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.